DBIllustration o55-3x20-6x25-6x30-6x35-5x40-6x45-5x50-5x55-5x60-3x65

DBIllustrationBank

Owner Age(s): 55
Employee Ages: 3@20, 6@25, 6@30, 6@35, 5@40, 6@45, 5@50, 5@55, 5@60, 3@65
Year: 2007


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3 Plan Comparison Traditional
Defined Benefit Plan
Cash Balance Plan Cross-Tested
Cash Balance Plan +
Profit Sharing Plan
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Defined Benefit Plan Cost of owner(s) $252,657 $153,926 $153,926
Owners' % of plan cost 15.4% 53.1% see Owners' % of
Grand Total below
401(k) Plan
(includes
Profit Sharing)
optional/required optional optional required
Additional benefit
to owner(s)
(includes owners'
401(k) deferral)
$27,250 $27,250 $50,000
Combined Plans Total for owner(s) $279,907 $181,176 $203,926
Owners' % of Grand Total 16.2% 47.7% 54.9%
Administrative expense: high twice as high three times as high
Overall Grade*: F C A
Comments: As an employee benefit plan, this plan is far too rich with many employees costing more than 85% of pay. Employee cost is 6.5% of pay for CBP, 9.5% for both plans. Employee cost is 8% of pay for both plans.


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*Note that even poorly graded plans may be appropriate in certain situations, such as for lower benefit levels, or if the employee total compensation package is negotiable.